Financial literacy rests on products

Responsibility for raising financial literacy levels among consumers lies with product manufacturers rather than education, according to an investment manager.

Speaking to ifa, Principal Global Investors chief executive Grant Forster said that it is important that financial literacy is engrained into products provided by the industry, as often the concepts are too full of jargon for clients to engage with.

“A lot of people are ready to engage fully [with their finances] but some of the concepts are very complex … so I think what it points to is the industry coming back with solutions,” Mr Forster said.

“It gets back to the investors not having to make these day to day decisions because that not what the investors wants to do in retirement.”

“I don’t think we’re going to get people over about 25 years of ages up to that literacy anyway- we don’t want them making asset allocation decisions.”

Mr Forster said that further developing products will help the industry services the increasing number of baby boomers looking to retire.

Principal’s recent CREATE report found that in the next decade, lifecycle funds are going to become increasingly important in the Australian superannuation industry to provide adequate savings for retirement.

“There are more people retiring than ever before and they’re also going to live longer than ever before,” Mr Forster said.

“These people, they’re not asset managers, they need some sort of solution and it’s in my opinion that they need a more sophisticated response.”

“The industry needs to provide a product and its lifecycle funds that is providing the opportunity that at least a big number [of investors] are provided for today.”

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